How to avoid unwanted attention from ATO Tax Audit

Wow, one month has already passed into the FY2019 tax season.

According to the Australian Taxation Office Statistic, almost 700,000 taxpayers claimed about $2 billion of other expenses in the 2017 financial year, including non-allowable items that are private and domestic.

At EndureGo Tax, as one of the most professional and experienced accountants and tax agents in #Inner West Sydney, #Ashfield, #Sydney, and #Adelaide, we have helped many people to prepare and lodge their tax returns and had helped them to reach an optimum tax position,  often when a client came to see us for the tax return, we will spend time to understand his/her occupation and explain to the client about what are allowable work-related deductions, and what evidences would be ATO require at the time of tax audit, and often we would want to sight the invoice evidence to protect the client’s interest.

After the tax return, we will compare the client’s total work-related deductions against the ATO’s benchmark, and inform the client that if one or more of the deductible items are over the benchmark, we then will work with the client to minimize the tax audit risk.

However, from what Assistant Commissioner Karen Foat said in a recent review, they had found and disallowed the bulk of the very unusual expenses. It is important to note that when people are deliberately making dishonest claims, particularly for larger sums, ATO will disallow and may impose a penalty and sometimes would impose criminal sanction.

Shortfall tax penalties can range from 25% to 75% of the shortfall amount.

It is important to remember when you are doing an individual tax return, it is very transparent, the income declared against the deductions claimed, and it is very easy for ATO to pick up some unusual items quickly. For example, there was a couple who tried to claim $58,000 wedding expense as a deduction, and they were saying the expense was related to an overseas conference. However, ATO had disallowed that and had initiated a prospection against the taxpayers.

Would you like to tell ATO that you are married

Another taxpayer tried to claim child care expenses as a deductible expenses, citing on the ground that the kid must be taken care of, else the taxpayer can not work and generate income, and the taxpayer put the expense in the tax return as a child-raising expense, and obviously this is an honest mistake and ATO just disallowed the deductions.

One key concern for the ATO this year is the deduction against rental property, especially around travel expenses for residential property, and depreciation expenses for the non-fixture in the second-hand dwelling. Another area of concern is for share economy, as at the moment, a lot of people are using AIRBNB to rent their property out, and most of the time, those data would be fed into the ATO system, and if you did not declare those income, you might be caught out.

EndureGo Tax is a specialist accounting firm specializing in AIRBNB tax returns, tax returns for rental properties, and small business tax returns, we will work with you to understand your business or situation hence we can help you to maximize your tax position. Please give us a call on 0410829900.